The Act sets out the statement of general duties of Directors. This statement of duties codifies the existing ‘common law’ rules and equitable principles relating to the obligations of company directors. The existing common law had focused on the interests of shareholders. The new law extends this by highlighting the connection between what constitutes the good of the company and a consideration of its wider corporate social responsibilities.
In simple terms, the company comes first. Directors must act in the interests of the company and not in the interests of any other parties (including shareholders). Even sole director/shareholder companies must consider the implications by not putting their own interests above that of the company.
The aim of the codification of duties is to make the law more consistent and accessible. It should be noted that other existing duties will continue to apply alongside the new statutory duties.
The Act outlines seven new statutory director’s duties, four of which took effect on 1 October 2007. The remaining three provisions will come into force on 1 October 2008.*
*On 7 November 2007 the government announced that a final commencement timetable for the Act will be issued in December 2007 and that many 1 October 2008 provisions will be put back to 1 October 2009.